French probe catches Lagarde's former top aide

Stephane Richard, Orange CEO, was Christine Lagarde's chief of staff at the French finance ministry when a dispute with businessman Bernard Tapie was settled with a big payout.

International Monetary Fund chief Christine Lagarde just can't seem to shake off a French corruption probe.

Prosecutors detained Stephane Richard, head of telecoms group Orange and Lagarde's former chief of staff when she was French finance minister, for questioning Monday about his role in settling a business dispute in 2008.

Richard denies any wrongdoing.

"This was expected and is a normal part of proceedings that does not in any way reflect on the outcome of the investigation," said a spokesperson for Orange, which recently changed its name from France Telecom.(FTE)

The spokesperson added that Richard's detention would not affect the running of the telecoms group. Orange shares fell by about 1.5%, under performing the benchmark CAC 40 index.

Lagarde's home was searched in March and she was questioned for two days by a French court last month. The court decided not to place her under formal investigation over her role in the decision to pay 285 million euros to settle a claim from businessman Bernard Tapie, a supporter of former French President Nicolas Sarkozy.

Lagarde, who said she acted in the interest of the state and within the law, was given the status of "supervised witness" instead, which means she would answer questions at any future hearings accompanied by a lawyer. The court could still place her under formal investigation if new evidence emerges during the inquiry.

The IMF has repeatedly stated its confidence in Lagarde since the investigation began, and said it is confident in her ability to carry out IMF duties.

Tapie sued the French state for compensation in 1993 after selling a stake in sports company Adidas to French bank Credit Lyonnais, which was owned by the state at the time. He claimed Credit Lyonnais defrauded him when it resold the stake at a far higher price. The bank has denied wrongdoing.

Lagarde has not been accused of profiting personally from the Tapie case but her decision to overrule officials and refer it to a process of arbitration that led to the payout raised questions about whether she was complicit in the misuse of funds and whether she had given Tapie preferential treatment because of his support for Sarkozy.

Lagarde was appointed IMF managing director in June 2011, succeeding Dominique Strauss-Kahn, who resigned after a New York hotel maid accused him of assaulting her in his suite. U.S. prosecutors dropped the case against him a few months later. Criminal charges against Strauss-Kahn in the United States were filed but later dropped.